To Be Proactive, the Audit Committee Should Ensure That

question 57

Multiple Choice

To be proactive, the audit committee should ensure that:
1) Audit committee members have knowledge, education, awareness, and sophistication concerning the various fraudulent management override and collusive schemes that may be perpetrated by management.
2) Only the external audit group needs have knowledge, education, awareness, and sophistication concerning the various fraudulent management override and collusive schemes that may be perpetrated by management.
3) The audit committee has reviewed the comprehensive fraud risk assessment provided by management and also considers how collusive fraud and management override schemes are mitigated and detected.
4) The audit committee periodically participates in continuing education programs that can prepare its members to appraise management's fraud risk assessment.
5) The audit committee identifies who has the specific responsibility for the collusive and management override fraud risk assessment process: its members, the internal audit group, or the independent audit group?
6) The audit committee is interacting with personnel beyond executive management and asking the tough questions of knowledgeable employees, financial managers, internal auditors, and external auditors.
7) The audit committee has a protocol for acting on proven unethical and potentially fraudulent conduct.
Select the answer which is most correct.

• A) 1, 2, 3, and 5.
• B) 1, 3, 4, and 6.
• C) 3, 4, 6, and 7.
• D) 4, 5, 6, and 7.

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Definitions:

Tuition

The fee charged for instruction or education, typically by an educational institution such as a school or university.

Disposable Personal Income

Funds available to families for saving or spending after subtracting income taxes.

Retained Earnings

The portion of net income that is kept by a company rather than distributed to its shareholders as dividends, used for investment or paying off debt.

Social Insurance Contributions

Payments made to social security systems by employers, employees, or the self-employed, used to fund public programs such as pensions, unemployment benefits, and health care.